United States Gambling Jurisdiction

Author: Otto

Last Updated: September 4, 2014

In more ways than one, the regulatory push concerning online gaming in the United States mirrors the regulatory shifts in Europe. Just as Europe is moving toward nation-by-nation regulation the US is looking at regulating online gaming in individual states, rather than at federal level.

State-by-state regulation emulates to a certain degree at least, the regulatory structure for land-based casinos in the US. In hindsight, it reflects the evolving legal status of online gaming, and the abject failure of online gaming proponents to craft credible online gaming legislation at federal level.

In late December 2011, the US Department of Justice ruled that the Wire Act of 1961 applied only to sports betting and not to online gaming. This paved the way for individual states to pursue their own online gaming regulations.

1. Senate Majority leader Harry Reid, a native from Nevada, pushed legislation that favoured Nevada. Primarily it favoured land-based casinos from Nevada and Nevada as regulatory authority. It forgot to address the concerns of the Indian tribes (major players in the US gaming arena) and many states were not in favour of the bill.

2. The draft failed to address the political dynamics of Congress. Failed to gain the support of the Republicans and Reid could not find a suitable platform to launch the bill from. Luckily due to the partisan difference Congress was in a better position to pass legislation.

As a result, states are setting up their own regulatory bodies for online gaming in the US. Nevada has already legalised online poker and expecting to see the windfalls from regulated online poker later this year.

New Jersey Online Gaming Legislation

New Jersey has passed legislation authorizing online casinos and online poker rooms. However, New Jersey Governor Chris Christie must still sign the bill into law.

Delaware Online Gaming Legislation

Delaware already approved online gaming regulations, other states have already already followed suit.

Gambling Jurisdiction Tax Rates

There’s a distinct difference between online gambling operators who pay their taxes and those who don’t. Operators based in the Caribbean pay very little taxes and a small license fee. Online casinos who want to operate from Costa Rica must pay $54,000 in tax per annum. Antigua charges an annual license fee of $75,000. The Kahnawake jurisdiction one of the lowest in the industry charges $10,000 per year. If US online gambling operators want to compete with unlicensed operators from these jurisdictions, they must lower their tax rate.

France and the United Kingdom learned that if the tax rate is too high, it fosters a breeding ground for unlicensed operators. They are unscrupulous, don’t pay their licenses and tax but they also disregard problem gamblers and under age gambling. From a legal point of view this is unfair since the unlicensed operator succeeds in attaining a larger segment of the market as opposed to the legal operator.

Where does this leave the American punter? Basically it leaves them unprotected allowing these companies to flourish and to launder money. That’s why it’s so important that the US fashions the proper tools that will make online gambling a reality in the United States and not just a pipeline dream.

How Will The US Keep Unlicensed Operators at Bay?

It’s imperative that the proper technology is used to keep the unlicensed operator out of the US and to impose the maximum penalty to those sites who operate without a US license. Money laundering must be combated through the Office of Foreign Asset Control (“OFAC”).

Conclusion

It’s taken a long time, 8 years to be exact before the Federal Government started online gaming reforms in the United States. Online gaming has a lot going for it. For one the overheads to run an online gaming establishment is way lower to that of a brick-and-mortar business. Online gaming businesses can flock to tax-friendly jurisdictions, giving them the necessary freedom to offer better prices to their clients.